Rebuilding Credit After a Federal Criminal Conviction

Rebuilding Credit After a Federal Criminal Conviction

Having a criminal record can make it really hard to get your finances back on track. A lot of people struggle with this. I want to help anyone whose gone through the justice system and is now trying to rebuild their credit. This article will give you some practical tips and information to help you move forward.

The Impact of Incarceration on Your Credit

When your locked up, it can be really hard to keep up with your financial obligations. You have no income coming in, and any debts you had before (credit cards, auto loans, etc) are still there accruing interest and payments. This can quickly damage your credit score and credit history.

Some other ways incarceration can impact your credit:

• Missed payments on debts – this will lower your credit score and show up negatively on your credit report
• Accounts going into collections from lack of payment
• Maxing out credit cards or credit lines without ability to pay
• Potential identity theft or fraud if you can’t monitor credit while locked up

So what can you do once your out to start rebuilding your credit? Here’s some tips:

Get Your Free Annual Credit Report

The first thing I’d recommend is going to AnnualCreditReport.com and getting your free credit report from each of the three credit bureaus – Experian, Equifax, and TransUnion. This will show you exactly what’s reporting on your credit right now and if there are any errors you need to dispute.

Under federal law, every consumer can get a free credit report from each of the credit bureaus once per year. Take advantage of this! It’s important to know what your dealing with.

Dispute Any Errors

If you find incorrect information on your credit reports – accounts that aren’t yours, payments listed that you didn’t miss, etc – you have the right to dispute this with the credit bureaus. Simply write them a letter identifying the error and include copies of any evidence you have (like bank statements, court documents, etc).

The credit bureau usually has 30 days to investigate the dispute. If they can’t verify the information is accurate, they must remove it from your credit report.

Consider Getting a Secured Credit Card

One of the best ways to rebuild credit is to get a new line of credit, use it responsibly by making on-time payments, and start establishing positive payment history. But with bad credit, it can be hard to get approved for a “regular” unsecured credit card.

That’s why I recommend looking into secured credit cards if needed. These require an upfront security deposit that becomes your credit limit. So it’s less risky for the card issuer. But responsible use can go a long way in rebuilding your score.

Just make sure to avoid cards with high fees and read the fine print carefully.

See If You Qualify for a Credit-Builder Loan

Similar to secured cards, credit-builder loans can help establish positive credit history. These loans hold the money you borrow in a bank account while you make monthly payments. Once paid off, you get the money back plus you now have a paid installment loan on your credit.

Banks and credit unions sometimes offer credit-builder loans. Or you can look into companies like Self Lender or Credit Strong.

Ask Creditors for Goodwill Deletions

If you have late payments or other negative marks from when you were incarcerated, you could try asking creditors for a “goodwill deletion.” This is when they voluntarily remove the negative item out of good faith.

You’ll want to write them a letter explaining your situation and taking responsibility. Emphasize that you’re now in a better place and trying to rebuild your financial life. There’s no guarantee of success, but it doesn’t hurt to politely ask.

Pay Down Debts

To improve your credit, you’ll need to get all accounts current and start paying down balances. I know – easier said than done. But even small steps will make a difference. Here are some tips:

• Prioritize paying down credit cards and other debts that are accruing high interest
• Consider debt consolidation loans or balance transfer cards to lower interest rates
• If needed, set up payment plans with creditors and collection agencies – something is better than nothing
• Stick to a budget that allocates some money every month to chip away at balances

Reducing your overall debt burden will help improve your credit utilization ratio – a key factor in credit scores.

Wait It Out

Now for the hardest part – patience! Rebuilding credit takes time. The impact of negative information starts to decrease after 6 months to a year. After 7 years, most items drop off your credit reports completely.

So if you stay focused on positive financial habits – paying bills on time, keeping balances low, checking credit reports, etc. – your credit score will slowly but surely improve.

Avoid “Quick Fix” Credit Repair Scams

When trying to rebuild credit, watch out for companies promising to “erase bad credit” or “create a new credit identity.” Those are huge red flags for scams.

Under the Credit Repair Organizations Act, no one can legally remove accurate negative information from your credit reports. So be very wary of any company that claims they can.

Stick to legitimate ways to improve your credit, like the steps outlined above. There are no shortcuts when it comes to credit repair!

Take Control of Your Financial Future

Rebuilding your credit after incarceration may seem daunting, but taking it step-by-step will set you up for success. Check your credit reports, dispute errors, open new responsible accounts, reduce debts – these are all proven ways to improve your score over time.

Most importantly, don’t get discouraged! There are lots of resources out there to help people in your situation get back on stable financial ground. You can do this!